Broadcom Inc. (NASDAQ:AVGO) received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Broadcom’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out the opportunities and risks within the US Semiconductor industry.
What’s The Opportunity In Broadcom?
According to my valuation model, Broadcom seems to be fairly priced at around 5.63% above my intrinsic value, which means if you buy Broadcom today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $497.79, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Broadcom’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Broadcom generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 49% over the next couple of years, the future seems bright for Broadcom. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in AVGO’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on AVGO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Broadcom, you’d also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Broadcom and we think they deserve your attention.
If you are no longer interested in Broadcom, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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Find out whether Broadcom is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Read More: At US$526, Is Broadcom Inc. (NASDAQ:AVGO) Worth Looking At Closely?